Region diversifies as funds for federal contracts decline

Northern Virginia had a strong year in 2013, thanks to an overall focus on diversification. In light of federal budget cuts, the region is expanding its economic base, moving away from a dependence on government contracts. Counties and cities are pinpointing new, innovative ways to attract business prospects.
Jennifer Ives, director of innovation and strategic partnerships for Arlington Economic Development, sees the county as a “case study for how a community can create innovation districts and move into the new economy.”

Ives says the recent launch of TandemNSI, a public/private partnership involving the private-sector venture capital firm Amplifier Ventures and Arlington Economic Development, builds on the county’s commitment to fast-growth technology product companies by giving them ways to connect more effectively with national security agencies. “The importance of this initiative can’t be overstated,” she says, noting that Amplifer Ventures will make connections between companies and agencies and also will provide the firms with mentors.

The partnership pairs the owners of fast-growth technology businesses with university officials, government program managers, representatives from Arlington-based federal agencies and members of the local business community. The goal is to help technology product companies better identify business opportunities.

TandemNSI is financed by a $350,000 grant from the Virginia Federal Action Contingency Trust (FACT) Fund with an in-kind $150,000 match from Arlington. FACT invests in initiatives designed to help boost Virginia’s economy at a time when it faces federal budget cuts and changing spending priorities.

The partnership feeds into the county’s three-pronged approach for economic growth — bringing people and ideas together, diversifying the economy and helping entrepreneurs develop their businesses. “You can’t have one of these without the others,” Ives says.

Several new technology-related firms were founded in the county or moved there last year, including Endgame Inc., a cybersecurity technology firm from Texas with more than 30 employees. “They have a technology that no one else has,” Ives says. “They needed to be near their private-sector users and talent.”
Another recent arrival, Distil Networks, a cloud security provider, has tripled its number of employees since moving to Arlington. Healthcare IT provider PriviaHealth quickly grew to more than 75 employees after its move from D.C.

Other new arrivals include the fast-growing education technology firm Common Application, which moved from Arizona and now employs more than 75 people, and cybersecurity firm Live Safe, founded by two Virginia Tech alums. “They have about 15 employees, have received funding from CIT Gap Fund and other sources and are in the startup growth phase,” Ives says. “They’re a rapidly growing company with a unique and innovative technology.”

The county also was able to snag the first East Coast location for California-based TechShop, a membership-based, do-it-yourself technology-focused workshop and fabrication studio. It offers classes and workshops with access to high-quality 3-D printers and other technology-based tools. The Arlington location opens this spring.

The county is able to attract and retain innovative companies, in great part, because of its sought-after 25-to 34-year-old workforce. “We have the highest concentration [of residents in that population group] in Virginia,” Ives says. “They make up almost one-third of our population.”

Fairfax County, the commonwealth’s most populous county, wants to expand into several industry sectors, including food service, automotive, life science and large-scale construction. “We’re also looking at new areas such as translational medicine,” says Gerald Gordon, president and CEO of the Fairfax County Economic Development Authority (FCEDA). “It works with genetic code, which has 6 billion characters. This is a computer function that requires an IT base, and that is what we have in Fairfax.”

Last year Fairfax snagged the headquarters of Amazon Web Services and its 500 jobs, thanks to the county’s large IT community and its highly regarded public school system. “The public schools are enormously important for us,” Gordon says. “They help us attract the best IT workers from around the world.”

The county also announced that Cvent Inc., which makes event management software, will shift its headquarters from another county location to Greensboro Station in Tysons Corner later this year. Cvent plans to add more than 400 employees in three years, almost doubling its headcount. It will lease about 130,000 square feet of space.

Fairfax also continues to attract foreign businesses. The FCEDA’s overseas offices are in London, Munich, Seoul, Tel Aviv and Bangalore. It also has Boston and Los Angeles offices.

Gordon says that, while the county probably will feel fallout from federal budget cuts in some areas, it also expects benefit from increased spending for cybersecurity. “We are one of the leading cybersecurity business communities in the country,” Gordon says.

Next door in Loudoun County, Buddy Rizer, director of the county’s Department of Economic Development, describes 2013 as a “really big year.” Loudoun continues to be a hot spot for commercial data centers. “We will have an estimated 5 million square feet of new data center space come online over the next three years,” Rizer says. “There hasn’t been one day in the last five years that we haven’t seen data-center construction in the county.”

The commercial side of the county also is technology based. “Seventy percent of the world’s Internet traffic flows through Loudoun,” Rizer says, noting that he is seeing an influx of companies that serve and use data centers. “We have 3,000 technology companies inside data centers doing business here.”

The county scored two additional data centers last year. Construction began on a 450,000-square-foot facility for Corporate Office Properties Trust, representing a $300 million investment, and a 217,000-square-foot data center for Digital Realty Trust, a $20 million investment. In addition, Pohanka Automotive struck a $15 million deal to build a 52,000- square-foot headquarters housing 80 employees.

Expansions include EPL Archives Inc. in Sterling, which is investing $6 million to construct a 38,000-square-foot medical lab.

The county’s growing rural economy includes 43 licensed wineries, representing $5 million in taxable sales. “Seven years ago we had 18 wineries,” Rizer says. “We have a whole team that focuses on the rural economy and works with landholders and farmers in the development of land for agricultural ventures.

Agriculture brings in about $69 million in tax revenues a year and represents a little more than half of the land base.”

The county also is home to 16 German companies. The latest to open a U.S. office in Loudoun is pharmaceutical company Biogrund, which invested approximately $1 million to open a facility. “That is a direct result of our international outreach program,” Rizer says.

Last year also was good to Prince William County, with announcements of capital investment reaching a 17-year high. The county’s Department of Economic Development registered 20 successful projects, which are expected to create 354 jobs and yield $1.04 billion of private capital investment at completion.

From June 2012 to June 2013, the county recorded 160 new businesses. “Prince William County presents a tremendous value proposition for companies,” says Jeff Kacz-marek, executive director of the Department of Economic Development. “Our location offers companies significant cost and other competitive advantages, which allow them to compete effectively at the national and international levels.”

The county solidified its position as a major player in the national data center market based on its robust fiber network, competitive power rates and a record-high $1 billion in capital investment spurred by the data center market. The county also has continued development of Innovation Park with the start of construction on about 9,000 square feet of wet lab space at the Prince William Science Accelerator. “Once completed, the facility will be the only public-private commercially available wet lab space in Northern Virginia,” Kaczmarek says.